LSUS MHA 710 EXAM 1 COMPLETE STUDY
GUIDE AND HEALTHCARE ECONOMICS
FOUNDATIONS REVIEW 2026
◉ What are some of the specific challenges faced by managers in
healthcare?
Answer: 1. The central roles of risk and uncertainty
2. The complexities created by insurance
3. The perils produced by information asymmetries
4. The problems posed by not-for-profit organizations
5. The rapid and confusing course of technical and institutional
change
◉ What does asymmetric information mean? Can you give an
example?
Answer: When one party in a transaction has less information than
the other party. For example, physicians and other healthcare
providers usually understand patients' medical options better than
patients do. Unaware of their choices, patients may accept
,recommendations for therapies that are not cost-effective or,
recognizing their vulnerability to physicians' self-serving advice,
may resist recommendations made in their best interest.
◉ What is adverse selection?
Answer: A situation that occurs when buyers have better
information than sellers. For example, high-risk consumers are
willing to pay more for insurance than low-risk consumers are.
(Organizations that have difficulty distinguishing high-risk from
low-risk consumers are unlikely to be profitable.)
◉ What is the problem of scarcity?
Answer: Demand for a good or service is greater than the availability
◉ What does it mean to say people are assumed to make choices
rationally?
Answer: focuses on individuals' efforts to best realize their goals,
given their resources.
◉ What does it mean to says resources are scarce?
Answer: Anything useful in consumption or production that has
alternative uses.
◉ What is opportunity cost?
, Answer: Potential loss from a missed opportunity. Passing up the
next best choice.
◉ What does "marginal" refer to?
Answer: The examination of the costs and benefits through a small
change in the production of goods
◉ What does efficiency refer to?
Answer: No way to rearrange production of goods in a way that
makes one person more better off without making somebody else
worse off. How well an economy uses scare resources to meet the
needs/wants of their customers
◉ How do positive economic statements differ from normative
economic statements?
Answer: Positive economics is objective while normative economics
is subjective. Facts/ What is vs What should be
◉ How can economics be applied to the health sector?
Answer: Describe, Explain, Evaluate, Plan
◉ As we progress through the chapters, think about the special
characteristics that apply to the health sector that might limit the
applicability of traditional economic models.
GUIDE AND HEALTHCARE ECONOMICS
FOUNDATIONS REVIEW 2026
◉ What are some of the specific challenges faced by managers in
healthcare?
Answer: 1. The central roles of risk and uncertainty
2. The complexities created by insurance
3. The perils produced by information asymmetries
4. The problems posed by not-for-profit organizations
5. The rapid and confusing course of technical and institutional
change
◉ What does asymmetric information mean? Can you give an
example?
Answer: When one party in a transaction has less information than
the other party. For example, physicians and other healthcare
providers usually understand patients' medical options better than
patients do. Unaware of their choices, patients may accept
,recommendations for therapies that are not cost-effective or,
recognizing their vulnerability to physicians' self-serving advice,
may resist recommendations made in their best interest.
◉ What is adverse selection?
Answer: A situation that occurs when buyers have better
information than sellers. For example, high-risk consumers are
willing to pay more for insurance than low-risk consumers are.
(Organizations that have difficulty distinguishing high-risk from
low-risk consumers are unlikely to be profitable.)
◉ What is the problem of scarcity?
Answer: Demand for a good or service is greater than the availability
◉ What does it mean to say people are assumed to make choices
rationally?
Answer: focuses on individuals' efforts to best realize their goals,
given their resources.
◉ What does it mean to says resources are scarce?
Answer: Anything useful in consumption or production that has
alternative uses.
◉ What is opportunity cost?
, Answer: Potential loss from a missed opportunity. Passing up the
next best choice.
◉ What does "marginal" refer to?
Answer: The examination of the costs and benefits through a small
change in the production of goods
◉ What does efficiency refer to?
Answer: No way to rearrange production of goods in a way that
makes one person more better off without making somebody else
worse off. How well an economy uses scare resources to meet the
needs/wants of their customers
◉ How do positive economic statements differ from normative
economic statements?
Answer: Positive economics is objective while normative economics
is subjective. Facts/ What is vs What should be
◉ How can economics be applied to the health sector?
Answer: Describe, Explain, Evaluate, Plan
◉ As we progress through the chapters, think about the special
characteristics that apply to the health sector that might limit the
applicability of traditional economic models.
